(qlmbusinessnews.com via telegraph.co.uk – – Mon, 23 Jan, 2017) London, Uk – –
Stamp duty is making the UK’s housing crisis worse by distorting the market and harming long-term development, the head of one of the world’s biggest property groups has warned.
Christian Ulbrich, global chief executive of Jones Lang LaSalle (JLL), said homebuyers were “paying for nothing” in a system that penalised landlords and second homeowners while doing little to address a lack of housing supply.
Britain has the highest property taxes of any developed country, figures from the Organisation for Economic Co-operation and Development show. Mr Ulbrich said the current system, where stamp duty jumps from 5pc to 10pc of a property’s value above £925,000, was “politically motivated”.
While the then Chancellor of the Exchequer, George Osborne, cut the rate of tax for the vast majority of house purchases with a big overhaul of the system in 2014, Mr Ulbrich said, the policy still made it “prohibitive” to build more houses.
“For long-term development, stamp duty is definitely harmful, because the stamp duty in itself doesn’t create any value. It’s an additional cost that makes development more unattractive and it has to be considered in the pricing,” he said.
Mr Ulbrich also hit out at the 3 percentage point surcharge that landlords and families pay when buying second homes, which he said had “a very strong dampening impact on the market”. He said he understood aims to reduce the influx of foreign money into the British property market, which Mr Ulbrich said would remain a haven for overseas investors, even after the Brexit vote.
However, he said, increasing supply would help to “create an environment where that demand finds a home”. “We need more building,” he said. “That is good for the economy”.
Mr Ulbrich cited the Crossrail scheme in London as an example where “focus on building the right infrastructure” helped to “enlarge the spectrum of commutable areas around London where people can still live and come to work every morning. “Stamp duty doesn’t help to build one single apartment, it just makes it more expensive.”
Mr Ulbrich also warned that JLL would be hit by a “double whammy” this year from rising business rates and the subdued commercial property market. Research shows that business rate bills in London are likely to soar by £9.4bn over the next five years. The JLL chief criticised the system as counter-cyclical, as he suggested that more frequent revaluations were necessary.
“The [commercial property] market is currently cooling down, at the same time, business rates are going up because they were reflective of values before the Brexit vote. But the impact is happening after the Brexit vote,” he said. “We were very much hit by the overall loss in sentiment in the property market in London, and then we got the increase in business rates, so it’s a real double whammy.”
By Szu Ping Chan